Israeli investors in US real estate sit at the intersection of state law, US federal tax and the Israeli Income Tax Ordinance. Section 122א in Israel offers either a flat 15% on gross rental income (no deductions, no foreign tax credit) or the ordinary track with deductions and treaty credit.
On the US side, a non-resident alien is subject to 30% gross withholding by default, or can elect net taxation (form W-8ECI). FIRPTA withholds 15% of gross sale proceeds on disposition, recoverable only via a filed return.
The most common structure — a foreign-owned single-member LLC — is disregarded for US tax but must still file form 5472 with a pro-forma 1120 each year; missing this triggers a $25,000 annual penalty. FBAR, FATCA and Israeli reporting on Israeli tax form 1301 also apply.
The largest real-world risk for Israeli investors in US real estate is not the property — it is filing failure. Get a written tax estimate from a US-Israel specialist before signing.